Berkshire Hathaway has two share classes. Which is right for you?
Berkshire Hathaway (BRK.A 0.99%) (BRK.B 0.91%) stock has proven to be one of the best-performing investments of all time. Since 1980, shares have increased more than 2,000 times in value. A $500 investment would now be worth a cool $1 million.
Want to invest in Berkshire? There are two options: A shares or B shares. The ticker symbol for the A shares is BRK.A, while the ticker symbol for the B shares is BRK.B. Which Berkshire stock should you buy?
Most people should buy this Berkshire stock
Warren Buffett decided to create a second class of Berkshire stock in 1996. At the time, the price of Berkshire’s original shares had exceeded $30,000. That’s a lot more than most people were prepared to spend on a single share of stock.
To make Berkshire more accessible, several independent funds were preparing vehicles that would allow investors to gain exposure to Berkshire without needing to pony up $30,000. In his 1996 shareholder letter, Buffett stressed that these funds “would have marketed themselves as Berkshire look-alikes.” He worried they would use Berkshire’s reputation to “entice naive small investors and would have charged these innocents high fees and commissions.”
In response, Berkshire B shares were created, with a starting price of just over $1,000. A-share owners had the right to convert to B shares on a 30-for-1 basis. However, B shares carried slightly weaker voting rights, with each share having 1/200th of the voting rights of an A share. But B shares still conveyed ownership in Berkshire, and at a lower price. Now, smaller investors could buy into Berkshire without needing to invest in a separately managed fund that charged unnecessary fees.
Note that the A shares have never experienced a stock split, and now have a price above $600,000. The B shares, meanwhile, have been split to help fund acquisitions, and now have a price of around $400. Many long-term investors enjoy the novelty and commitment required to own Berkshire’s A shares, but for the vast majority of investors, the B shares provide the same exposure in a more affordable, far more flexible way.
Ryan Vanzo has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway. The Motley Fool has a disclosure policy.
